How to raise financially savvy kids

The old 15th century idiom may have said that ‘Children should be seen and not heard’, but in the 21st century, children are pretty much at the forefront of our lives. They are the most important members of a family, and sometimes even the decision makers! As parents, we try to teach them good morals, healthy habits and the importance of learning their lessons at school, but we often miss out on the lesson that is not taught in schools – teaching them about money.

Why is this so? Perhaps we think it is too early to burden the child with financial cares, perhaps we think they won’t understand about it. But the fact is, just like good manners, it is what we inculcate in children at a young age that stands them in good stead when they are old enough to make their own decisions.


So how can we go about raising financially savvy children?

Share the decision-making process

Keep your children in the loop on simple financial decisions. Discuss why we may have bought a larger quantity of groceries for the lower per-unit price. Talk about how you and your spouse are saving up for the family vacation. Try to keep it positive, of course, by emphasising that saving now leads to rewards later.

Encourage children to earn their pocket money

This is a popular practise in the West, and should be encouraged here as well. Let your children be assigned some small jobs around the house. It may be as simple as looking after a younger sibling, helping clean the family car, watering the plants etc. Make them feel they are earning their pocket money. Rather than making ‘I will stop your pocket money if you don’t do this!’ into a threat, let there be a positive co-relation of ‘I earn pocket money because I do this’.

Open a minor’s banking account for them

Most banks offer accounts for minors. It is an excellent idea to open one for your child and familiarise him or her with the banking terminology and associated things. Take them with you occasionally when you visit your bank branch. Let them learn what a bank statement looks like, how money grows, how savings earn interest, what a bank looks like. Nothing teaches children the value of money so much as spending time in a Bank branch.

Let them understand where the money comes from

One of the best short stories I’ve read in recent times was about an uneducated young boy who thinks that an ATM exists to dispense currency notes – without understanding that money has to first be deposited into an account for the funds to be available for withdrawals in this manner. So if you are depositing cash in your account, let your children come with you. When you withdrawn cash from an ATM, tell them it is out of money you’ve put there already and not some sort of magic.

Present financial prudence as a choice rather than a sacrifice

It is easy for a child to start associating prudence with cheapness or worse, deprivation. Emphasise that you are making a choice to forego something right now so that you can reap the benefits later. Associate savings with ‘smart buying’ rather than with ‘cheapness’.

Let your children know about the family budget

We all plan for the future, for a foreign vacation, for a new car, for a new house. Let your children feel invested in these decisions. Let them understand the efforts you have had to put in and the time you have had to invest to make those dreams come true. Talk about how you have set aside a sum of money from your salary to pay for a trip to Singapore, or about how foregoing a vacation this year is so that you can move into a bigger house soon.

It is never too early to start making budgets

Teach your children to manage their personal finances. If your daughter wants a new bicycle or your son wants a doll, tell them that if they manage their pocket money and front a part of the cost, you will contribute the rest. Encourage them to track their expenses and save the rest either in their bank account, or if the amounts are smaller, in a piggy bank.

Warn them of the dangers of credit

By the time your children are teenagers, they will be tempted by banks offering credit cards, and if they have bank accounts, debit cards. This can be the most important lesson – if children are not taught early enough about the realities of credit card debt, they can end up running up debts you will be called upon to pay. Explain that there is no such thing as free credit, and the importance of keeping a value on money.

As a parent, the responsibility of your children’s financial future rests squarely on your shoulders. You spend a lot of money on raising your children and want them to reap the benefits of it. The first thing you must ensure, then, is that they learn to value it.

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  1. It is essential for you to teach the right values to your kids. Helping them grow with the right financial skills is something that they will thank you for! You can do a lot of things that will help them realize the importance of the money. In an initial stage, restrict their pocket money. Having more in hand makes them spend more unnecessarily! Once they enter the teenage, encouraging them for freelancing jobs will be of great help. Once they earn it themselves, they will realize the importance of money.


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